I.T.AS. NOS.296/I9 TO 300/113 OF 1998-99 VS I.T.AS. NOS.296/I9 TO 300/113 OF 1998-99
2001 P T D (Trib.) 2919
[Income-tax Appellate Tribunal Pakistan]
Before Jameel Ahmed Bhutto, Accountant Member and
Karamat Hussain Niazi, Judicial Member
I.T.As. Nos.296/IB to 300/IB of 1998-99, decided on 31/03/2001.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss.66-A & 5(1)(c)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---When Inspecting Additional Commissioner acts as Assessing Officer, he could not,. in respect of such assessments exercise the powers of revision under S.66-A of the Income Tax Ordinance, 1979 and in that case, as provided under S.5(1)(c) of the Income Tax Ordinance,'1979, read with S.66-A of the Income Tax Ordinance, 1979, the revisional powers shall be exercisable by the Commissioner of Income Tax.
(b) Income Tax Ordinance (XXXI of 1979)---
----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Assessments were cancelled on the contention that the Housing Societies engaged in the development of residential colonies were subjected to tax on their receipts from sale of plots of land to its members or clients at the G.P. rate 15% on such receipts---Validity-- Inspecting Additional Commissioner fell in error by coming to the conclusion that receipts from sale of land were never scrutinized by the Assessing Officer who had admittedly obtained details of the business and found no reason to subject the receipts of the assessee to G.P. rate at 15%-- No material was available to hold that S.66-A was applicable on the ground that proper treatment as per law had not been accorded resulting in the loss of revenue---First requirement of issuance of notice was not fulfilled because the original assessment orders could not be considered as erroneous insofar as prejudice to the interest of revenue---Notice issued under S.66-A was neither based' on any enquiry, evidence or material on record, nor issued after, examination of the case with an independent, impartial and unbiased mind, especially when most of the original assessments had been made by his counterpart Inspecting Additional Commissioner--Inspecting Additional Commissioner was not competent topass the impugned order under S.66-A of the Income Tax Ordinance, 1979 in circumstances.
Sukdeo Doe Jalan v. C.I.T. 26 ITR 617 distinguished.
1988 PTD 723; 1984 PTD 201; 1984 PTD 137; 1969 PTD (Trib.) 144; Glaxco Laboratories' case 1992 SCC 910 (SC Pak.) and (2001) 83 Tax 193 (SC Ind.) rel.
Nasir Khursheed, I.T.P. for Appellant.
Muhammad Tahir Khan, D.R. for Respondent.
Date of hearing: 30th March, 2001.
ORDER
JAMEEL AHMED BHUTTO (ACCOUNTANT MEMBER).---The above captioned appeals of the assessee are directed against the order, dated 27-6-1998 passed by the learned Additional Commissioner of Income Tax Wealth Tax, Range-VII, Companies Zone, Islamabad (IAC) under section 66A of the Income Tax Ordinance, 1979 (hereafter the Ordinance) in respect of the assessments years 1991-92 to 1995-96 whereby the original assessments have been cancelled for de novo assessment of the receipts of the assessee from the alleged sale of land on the lines indicated in his show-cause notice, dated 22-6-1998.
2. We have heard the teamed representatives of both the parties and considered the facts and circumstances of the case in light of the orders passed at lower forums and the material available on the file. In spite of repeated opportunities provided to the learned D.R., neither the case records of the assessee have been produced nor any parallel case has been presented before us in support of the contention that the housing societies engaged in the development of residential colonies are subjected to tax on their receipts from sale of plots of land to its members or clients at the G.P. rate of 15% on such receipts.
3. Having considered all aspects of the case, we are convinced that the learned IAC was not competent to exercise his revisional powers under section 66A of the Ordinance since the original assessment orders were also passed under sections 62/132 or under section 62 of the Ordinance by his counterpart IAC, Range-III, Companies Zone, Islamabad, in respect of the assessment years 1992-93 to 1995-96. In this respect, our attention has been drawn to the text of C.B.R's. Letter U.O. No.316/96-LAW, dated January 13, 1997 (appearing at page 310 of S. A. Salam's Complete Income Tax Law, 7th Edition) which states that a person cannot be a judge of his own cause. On the same plea, when an Inspecting Additional Commissioner acts as Assessing Officer, he cannot, in respect of such assessments, exercise the powers of revision under section 66A of the Income Tax Ordinance, 1979. In that case, as provided under section 5(1)(c) of Ordinance, read with section 66A (ibid), the revisional powers shall be exercisable by the CIT". We also notice that the learned IAC based his judgment on a case cited in his order as Sukdeo Doe Jalan v. CIT, vide No.26 ITR 617 which related to the case of a contractor and had no bearing on the case of the assessee where development of housing society was not undertaken on contract basis but .advanced/deposits were received from the members and clients for the allotment and sale of plots of land. The learned D.R. has not been able to trace out the ITAT's decision in I.T.A. No.830/KB of 1980-81 referred to in the impugned order and, therefore, it is not possible for us to judge whether the issue involved in that case was also same or similar to the one involved in the instant case. We also note that the assessee's explanation, dated 27-6-1998 submitted in response to show-cause notice under section 66A was declared totally unsatisfactory on grounds which were not valid and could not be substantiated either on facts or in law. The learned IAC fell in error by coming to the conclusion that receipts from sale of land were never scrutinized by the Assessing Officer who had admittedly obtained details of the assessee's business and found no reason to subject the receipts of the assessee to G. P. rate at 15 % . There was no material available with the learned IAC to hold that section 66A was applicable in the case on the ground that proper treatment as per law had not been accorded 'resulting in the loss of revenue. We are of the view, that the first requirement of issuance of notice was not fulfilled by the learned IAC because the original assessments orders could not be considered as erroneous in so far as prejudicial to the interests of revenue. There is a chain of authorities on this issue interpreting the words "erroneous and prejudicial to the interests of revenue". Reliance can be placed on 1988 PTD 723, 1984 PTD 201, 1984 PTD 137 (AJ&K), 1969 PTD (Trib.) 144 and 1992 SCC 910 SC Pak (Glaxco Laboratories' case). Even in India, the same interpretation has been consistently followed by their superior courts in respect of section 263 of the Income Tax Act which corresponds to section 66A of the Ordinance. Thus; in a recent judgment of the Supreme Court of India reported as (2001) 83 Tax 193 (SC Ind.), the law on the subject has been interpreted as under:------
"A bare reading of this provision makes it clear that the prerequisite to the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commis sioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to tl6 interests of the Revenue. If one of them is absent- if the order of the Income-tax Officer is erroneous but is not pre judicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue---recourse cannot be had to section 263(1) of the Act.
There can be no doubt that the provisions cannot be invoked to correct, each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind."
"The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law."
For the facts and reasons stated above, we are of the considered view that the learned IAC was not competent to pass the impugned order under section 66A of the Ordinance. The notice issued under section 66A was neither based on any enquiry, evidence or material on record, nor issued after examination of the case with an independent, impartial and unbiased mind, especially when most of the original assessments had been made by his counterpart IAC. The impugned order is not sustainable in the eye of law and is, therefore, cancelled.
5. Consequently, the appeals of the assessee succeed.
C.M.A./M.A.K./104/Tax(Trib.) Appeals accepted.